China petrochemical logistics woes worsen on Shanghai lockdown

SINGAPORE (ICIS)–Further delays in petrochemical deliveries in China can be expected as Shanghai was placed under lockdown to contain surging COVID-19 cases in the metropolis.

Transportation of cargoes has already been affected by pandemic-related restrictions in other cities since mid-February, as China battles a fresh wave of coronavirus infections caused by the Omicron variant.

Shanghai, which is China’s financial hub, also houses refineries, as well as a number of petrochemical and downstream plants.

Factories under closed-loop management continue to operate, implying no immediate hit on production.

Most petrochemical producers in the city, however, have had to halt cargo deliveries, market sources said.

The city announced late on 27 March a two-step lockdown, to seal off the east and south sides of the Huangpu River for four days from 28 March; followed by four days in the west side from 1 April, to carry out mass COVID-19 testing.

Public transports were suspended, and only vehicles delivering essential services and goods allowed on the road.

Pockets of lockdown across China following the recent surge in Omicron infections have been slowing down logistics operations in the country.

Among those that recently imposed lockdowns were Shenzhen and Dongguan in the southern Guangdong province; Changchun, the capital of northeastern Jilin province; and Shenyang, the capital of Liaoning province, also in the northeastern region.

Shanghai logistics firms are telling customers not to ship in or lift cargoes from their warehouses during the lockdown period.

“The lockdown will affect container shipping and our warehouses will shut accordingly,” local company Feisu Logistics said in a statement.

“Cargo loading and offloading have to stop because those trucks can’t obtain the vehicle pass,” said a trader.

Sinopec Shanghai Petrochemical (SPC), which operates a big refinery and petrochemical complex in Shanghai, is discussing with local government authorities on how to address the transportation issue, a company source said.

“The [truck] pass is difficult, if not possible, to get at this time. The top priority is people, the mass virus-testing. All others have to be put aside, “said a second trader.

Petrochemical plants in Shanghai are mostly located in the remote Jinshan district, and so far, production has not been affected, industry sources said.

“We started on-site working two weeks ago. So, productions are basically normal. The only problem is logistics,” said the SPC source.

Workers, especially those on the front production lines, generally live in dormitories besides manufacturing sites, enabling production to continue as usual.

“The question now is there seems no end on the Omicron [variant]. Productions cuts or shut[downs] will be the next if transportation problems can’t be resolved in short term as producers’ storage capacities are limited,” said a polypropylene (PP) producer.

Despite widening restrictions and lockdowns, the spread of the virus is showing no sign of easing.

From mid-February to 27 March, Shanghai reported a total of 802 locally transmitted cases and 14,376 asymptomatic cases in this wave of outbreak, becoming one of the hardest hit areas in China.

Focus article by Fanny Zhang

Additional reporting by Yvonne Shi, Yoyo Liu and Lucy Shuai

Thumbnail photo: Medical personnel in protective gear drive an ambulance in Shanghai, China on 23 March 2022. (By ALEX PLAVEVSKI/EPA-EFE/Shutterstock)

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